Definition
The Halsey Premium Plan is one of the first successful incentive wage systems implemented in the U.S. industry, established by Frederick A. Halsey (1856-1935). The primary purpose of this plan was to improve upon the traditional straight piece-rate wage system by tackling issues such as management rate cutting.
Under this plan, workers receive a standard hourly rate for a designated task. If they complete the task in less time than allocated, they receive a premium or bonus, which is a percentage of the time saved. The aim was to provide workers with a financial incentive to increase their productivity without facing reductions in wage rates that were common in the piece-rate system.
Examples
-
Manufacturing Industry: A factory worker is assigned a task that is expected to take 10 hours. The worker finishes the job in 8 hours. Under the Halsey Premium Plan, the worker would be paid for the full 10 hours and a premium (say 50%) for half of the 2 hours saved, resulting in a total compensation greater than just the hourly wage.
-
Construction Project: A construction worker is tasked with laying a specified amount of bricks in a standard 8-hour workday. Completing the task in 6 hours results in the worker being paid for the full 8 hours plus an additional premium for part of the saved time.
Frequently Asked Questions
What problem does the Halsey Premium Plan solve?
The Halsey Premium Plan addresses the issue of management rate cutting in the traditional piece-rate system, which discouraged workers from maintaining high productivity due to fears of reduced rates.
How is the premium calculated?
The premium is generally calculated as a percentage (commonly around 50%) of the time saved by the worker. This percentage can vary depending on organizational policies.
Is the Halsey Premium Plan still in use today?
While not as widespread as it once was, variations of the Halsey Premium Plan continue to influence modern incentive wage systems and are used in certain industries where productivity incentives are essential.
What are the main benefits for workers under this plan?
Workers benefit by earning more for increased productivity without risking a cut in wage rates. The plan provides a fair and motivating incentive structure.
Can the Halsey Premium Plan be applied to all industries?
While it can be adapted to various industries, the Halsey Premium Plan is most effective in environments where tasks can be clearly defined and the time savings easily measured.
Related Terms
- Piece-Rate System: A wage system where workers are paid a fixed rate for each unit of output they produce.
- Standard Hour Plan: An incentive wage plan similar to the Halsey Plan, where workers are paid based on standard times set for tasks.
- Taylor’s Differential Piece-Rate System: A system where efficiency is rewarded with a higher piece rate, introduced by Frederick Winslow Taylor.
- Gainsharing: A system where increased profitability from improved productivity is shared between workers and the organization.
Online References
- Investopedia: Incentive Plans
- Economic Discussion: Halsey Plan of Incentive
- Management Study Guide: Incentive Plans
Suggested Books for Further Study
- “Economics: Principles in Action” by Arthur O’Sullivan and Steven M. Sheffrin
- “Compensation Management” by Dipak Kumar Bhattacharyya
- “Labor Economics” by George Borjas
- “Human Resource Management” by Gary Dessler
- “Principles of Management” by Michael A. Hitt, Stewart C. Black, and Lyman W. Porter
Fundamentals of Halsey Premium Plan: Labor Economics Basics Quiz
Thank you for learning about the Halsey Premium Plan and testing your knowledge through our quiz sections. Keep exploring to further enhance your understanding of labor economics and incentive wage systems!